## Facts

- James A. Carroll, a Chicago Police Department detective, claimed a $720.80 deduction on his 1964 federal income tax return for university tuition and related educational costs.
- Carroll attended DePaul University part-time as a philosophy major and took courses in English, philosophy, history, and political science.
- Carroll stated his course of study was in preparation for entrance to law school.
- The Chicago Police Department encouraged officers to attend college by adjusting schedules to avoid conflicts with classes, but it did not require attendance.
- The Commissioner disallowed the deduction and determined a deficiency.
- The Tax Court sustained the deficiency, holding the expenses nondeductible under IRC § 162(a) and barred as personal expenses under IRC § 262; Carroll appealed.

## Issues

1. Whether Carroll’s college expenses were “ordinary and necessary” business expenses deductible under IRC § 162(a) as education to maintain or improve skills in his current employment.
2. Whether, under Treas. Reg. § 1.162-5, the education was nondeductible because it was undertaken primarily to qualify for a new trade or business or was personal within the meaning of IRC § 262.

## Decision

- The Seventh Circuit affirmed the Tax Court.
- Carroll’s educational expenses were not deductible under IRC § 162(a).
- The expenses failed to qualify as deductible “education” expenses under Treas. Reg. § 1.162-5 under either the 1958 regulation in effect for 1964 or the 1967 revision.
- The expenses were treated as nondeductible personal expenses under IRC § 262.
- The Commissioner’s deficiency determination stood.

## Legal Principles

- Educational expenses are deductible under IRC § 162(a) only if they are undertaken primarily to maintain or improve skills required in the taxpayer’s present trade or business, or to meet employer or legal requirements for continued employment or status.
- Educational expenses are not deductible if undertaken primarily to obtain a new position or substantial advancement, or if they qualify the taxpayer for a new trade or business.
- Employer encouragement or schedule accommodation, without a requirement tied to current employment or rank, does not convert generally educational or career-qualifying coursework into an “ordinary and necessary” business expense.
- Where the taxpayer’s stated educational purpose is preparation for entry into a different profession (including preparation for professional school), the expenses are treated as nondeductible personal expenditures under IRC § 262.

## Conclusion

The court held that a police detective’s college expenses were not deductible because the education was primarily aimed at preparing for law school and a different profession rather than maintaining or improving skills in his existing work, making the costs nondeductible under the education-expense regulations and barred as personal expenses.


Carroll v. Commissioner, 418 F.2d 91 (7th Cir. 1969)